Duggan v. Martorello

• Decision Date: 30 March 2022
• Docket Number: CIVIL ACTION NO. 18-12277-JGD
• Citation: 596 F.Supp.3d 158
• Parties: Dana DUGGAN, individually and on behalf of persons similarly situated, Plaintiff, v. Matt MARTORELLO and Eventide Credit Acquisitions, LLC, Defendants.
• Court: U.S. District Court — District of Massachusetts

596 F.Supp.3d 158

Dana DUGGAN, individually and on behalf of persons similarly situated, Plaintiff,

v.Matt MARTORELLO and Eventide Credit Acquisitions, LLC, Defendants.

CIVIL ACTION NO. 18-12277-JGD

United States District Court, D. Massachusetts.

Filed March 30, 2022

Amy E. Tabor, Pro Hac Vice, Cynthia B. Chapman, Pro Hac Vice, John B. Scofield, Jr., Pro Hac Vice, Michael A. Caddell, Caddell & Chapman, Houston, TX, John J. Roddy, Elizabeth A. Ryan, Bailey & Glasser LLP, Boston, MA, for Plaintiff.

Ian D. Roffman, Ashley M. Paquin, Michael J. Leard, Nutter, McClennen & Fish, LLP, Boston, MA, Benjamin Rottenborn, Pro Hac Vice, Woods Rogers PLC, Roanoke, VA, Bernard Robert Given, Pro Hac Vice, William Nathaniel Grosswendt, Pro Hac Vice, Loeb & Loeb LLP, Los Angeles, CA, Elaine McCafferty, Pro Hac Vice, Karen Stemland, Pro Hac Vice, Woods Rogers PLC, Charlottesville, VA, Patrick Daugherty, Pro Hac Vice, Van Ness Feldman LLP, Washington, DC, for Defendant Matt Martorello.

Ian D. Roffman, Michael J. Leard, Nutter, McClennen & Fish, LLP, Boston, MA, Benjamin Rottenborn, Pro Hac Vice, Woods Rogers PLC, Roanoke, VA, Bernard Robert Given, Pro Hac Vice, William Nathaniel Grosswendt, Pro Hac Vice, Loeb & Loeb LLP, Los Angeles, CA, Elaine McCafferty, Pro Hac Vice, Karen Stemland, Pro Hac Vice, Woods Rogers PLC, Charlottesville, VA, Jon Hollis, Pro Hac Vice, Woods Rogers PLC, Richmond, VA, for Defendant Eventide Credit Acquisitions, LLC.

MEMORANDUM OF DECISION AND ORDER ON MATT MARTORELLO'S MOTION TO DISMISS

DEIN, U.S.M.J.

I. INTRODUCTION

Plaintiff Dana Duggan ("Duggan"), a Massachusetts resident, has brought this putative class action against Matt Martorello ("Martorello") and his company, Eventide Credit Acquisitions, LLC ("Eventide"), alleging that the defendants engaged in an internet-based predatory lending scheme in which they charged Duggan and other consumers unconscionably high interest rates, often exceeding 500%, for short-term loans. According to Duggan, Martorello and Eventide sought to evade state and federal laws prohibiting usurious lending practices by partnering with the Lac Vieux Desert Band of Lake Superior Chippewa Indians ("LVD" or the "Tribe") to set up a lending entity. Under this so-called "rent-a-tribe" scheme, LVD, through a company known as Big Picture Loans, LLC ("Big Picture Loans"), allegedly acted as the nominal lender while Martorello and Eventide operated and exercised actual control over the lending business under the cloak of the Tribe's sovereign immunity. Duggan claims that this arrangement enabled the defendants to take advantage of the privileges and immunities available to Native American tribes to carry out their fraudulent enterprise and enrich themselves at the expense of borrowers. By her Second Amended Class Action Complaint, Duggan has asserted claims against Martorello and Eventide for violations of Massachusetts lending, licensing and consumer protection laws, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. ("RICO"), unjust enrichment and declaratory judgment. Additionally, Duggan is seeking to certify a class and a subclass of similarly situated borrowers residing in Massachusetts and in other states around the country.

The matter is before the court on "Matt Martorello's Motion to Dismiss Plaintiff's Second Amended Class Action Complaint" (Docket No. 124). By his motion, Martorello contends that all of Duggan's claims against him must be dismissed for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2) because none of the conduct complained of that occurred in Massachusetts was carried out or directed by him, and because Duggan has failed to show that it would be appropriate for this court to exercise personal jurisdiction over him under RICO's nationwide service of process provision. In addition, Martorello contends that Duggan's claims against him must be dismissed under Fed. R. Civ. P. 12(b)(6) because her allegations are conclusory, speculative and inconsistent with relevant documents, a choice of law provision contained in Duggan's loan agreement with Big Picture Loans defeats her claims in this action, and Duggan has otherwise failed to state a claim against Martorello with respect to any alleged theory of liability. After consideration of the parties’ written submissions and oral arguments, and for all the reasons described below, Martorello's motion to dismiss the Second Amended Complaint is DENIED.

II. STATEMENT OF FACTS

Standard of Review of Record

"On a motion to dismiss for want of personal jurisdiction, the plaintiff ultimately bears the burden of persuading the court that jurisdiction exists." Astro-Med, Inc. v. Nihon Kohden Am., Inc., 591 F.3d 1, 8 (1st Cir. 2009), and cases cited. "When a district court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, as in this case, the ‘prima facie’ standard governs its determination." United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 618 (1st Cir. 2001). Thus, to meet its burden, the plaintiff must "demonstrate the existence of every fact required to satisfy both the forum's long-arm statute and the Due Process Clause of the Constitution." Id. (quotations and citation omitted). Under this standard, the court will look to the facts alleged in the pleadings and the parties’ supplemental filings, including affidavits. Sawtelle v. Farrell, 70 F.3d 1381, 1385 (1st Cir. 1995). The court will accept the plaintiff's properly documented "facts as true (whether or not disputed) and construe them in the light most congenial to the plaintiff's jurisdictional claim." N. Laminate Sales, Inc. v. Davis, 403 F.3d 14, 24 (1st Cir. 2005) (quoting Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 51 (1st Cir. 2002) ) (additional quotations and citations omitted). It will "then add to the mix facts put forward by the defendants, to the extent that they are uncontradicted." Id. (quoting Daynard, 290 F.3d at 51 ) (additional quotations and citation omitted). Notwithstanding the liberality of this approach, the court is not required to "credit bald allegations or unsupported conclusions." Carreras v. PMG Collins, LLC, 660 F.3d 549, 552 (1st Cir. 2011).

Similarly, when ruling on a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the court must accept as true all well-pleaded facts and give the plaintiff the benefit of all reasonable inferences. See Cooperman v. Individual, Inc., 171 F.3d 43, 46 (1st Cir. 1999). In doing so, the court may consider "documents central to [the] plaintiff[’s] claim" and "documents sufficiently referred to in the complaint" without converting the motion into one for summary judgment. Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001) (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993) ). Additionally, "[w]hen ‘a complaint's factual allegations are expressly linked to – and admittedly dependent upon – a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).’ " Gustavsen v. Alcon Labs., Inc., 272 F. Supp. 3d 241, 246 (D. Mass. 2017) (quoting Beddall v. State Street Bank & Trust Co., 137 F.3d 12, 17 (1st Cir. 1998) ), aff'd, 903 F.3d 1 (1st Cir. 2018). To the extent any "such documents contradict an allegation in the complaint, the document trumps the allegation." Id. See also Clorox Co. P.R. v. Proctor & Gamble Commercial Co., 228 F.3d 24, 32 (1st Cir. 2000).

Applying these standards to the instant case, the relevant facts are as follows.¹

Overview of the Alleged Scheme

This case arises out of an allegedly illegal lending operation involving short-term, high interest loans known as "payday" loans, which were made by Big Picture Loans and its predecessor, Red Rock Lending LLC ("Red Rock"), to Massachusetts residents and others over the internet. Duggan claims that Martorello, a resident of Texas, created and carried out this operation by partnering with the LVD Tribe in what is commonly known as a "rent-a-tribe" lending scheme. (Compl. ¶¶ 1-2, 5, 25). According to the plaintiff, the scheme was designed to evade state lending and consumer protection laws, and enable Martorello and Eventide to charge exorbitant interest rates far exceeding the rates authorized under state anti-usury laws, by exploiting the protections of the Tribe's sovereign immunity. (See id. ¶¶ 1-5). Specifically, as Duggan describes in the Introduction to her Second Amended Class Action Complaint ("Complaint"):

In an attempt to operate an internet-based lending enterprise beyond the scrutiny of Massachusetts’ and other states’ usury laws, Matt Martorello created the business model and the entire lending platform of Big Picture Loans, LLC ("Big Picture" or "Big Picture Loans") and then affiliated the business with a Native American tribe. Lurking in the shadows, there is a complicated corporate management structure attempting to hide the fact that non-tribal members, namely Martorello, his family and companies, reap all the net revenue from the lending operation. The purpose of this litigation is to shed light on this criminal enterprise that was established with the intent of evading state lending laws, to return the illegal gains to the exploited borrowers, and to obtain statutory damages in accordance with Massachusetts (as well as other states) and federal laws.

(Id. ¶ 1). Thus, Duggan claims that Big Picture Loans was merely "a front to disguise Martorello's and [Eventide's] roles" in controlling and overseeing the lending operations and "to ostensibly shield the scheme by exploiting tribal sovereign immunity." (Id. ¶ 5). In exchange for allowing Martorello to use its name and status, "the Tribe initially received about two percent of the gross revenue from the loans." (Id. ¶ 6). However, in an alleged "attempt to bolster its...